Insurance agents need to encourage business owners to protect their hard-earned assets through succession, exit, and transition (SET) planning. Most business owners acknowledge that they need to plan for the future, but they are too busy handling day-to-day operations to focus on other important business matters.
What is an exit plan?
An exit strategy helps protect the business owner, their family, employees, and company when unexpected situations arise. If SET planning is not done before it is needed, it will be done by default during crises with potentially disastrous results. An exit plan is a blueprint that can be developed and implemented for the following scenarios:
o Sales of businesses
o Inside transactions
o Passive ownership
o Premature death
o Disability
o Retirement
o Wealth accumulation and asset protection
o Key-employee retention
o Legacy planning
o Orderly estate distribution
o Prevention of misspent life insurance dollars
Some clients may need just one or several strategies to address these situations. The key is getting them to sit down and listen and realize that the planning process is not as scary and complicated as they think.
While many insurance agents are qualified to advise business owners how to plan, they may not know how to break through their resistance. They know that time is of the essence in putting plans in place to protect the business, rather than waiting until a disaster strikes, such as a sudden catastrophic illness or even death. Planning in the aftermath of an emergency is like shutting the barn door after the horses run out. Clients must be encouraged to plan before it is too late.
Take Joe, for example, a business owner who was always too busy to plan for his premature death, transition of his business to the next generation, and orderly distribution of his estate. He died suddenly, leaving his family foundering and confused about how to run the business. Planning could have prevented his family from coping with critical business decisions while dealing with their grief over his death.
Information overload
Many clients are simply overwhelmed by too much information to get the planning process rolling. They feel that they will have to do everything or nothing at all, so they just say "no" to avoid the whole ordeal.
These same clients also have other professional advisors -- lawyers, accountants, bankers, and financial planners -- giving them advice and providing information, in addition to friends, family members, and associates. Soon, they begin to suffer from information overload and refuse to talk to anyone about planning. The key is to provide clients with small, easily digestible amounts of information that focus on one specific business issue at a time.
Keep it short and sweet
Simplicity and choice are the cornerstones of successful planning. After speaking with clients to create a customized SET approach, clients should be provided with a selection of easy-to-digest plans that deal with specific issues. For example, if a client plans to sell their business, their agent should schedule three or four planning sessions that address that particular issue. At the end of these sessions, the business owner will feel that they have dealt with this concern and feel a greater peace of mind. This positive experience makes them feel more inclined to address other issues.
By packaging each of these plans and giving clients a quick and easy process to follow, they will stay focused on the information at hand. Clients can pay a fee for brief planning sessions, and the agent can earn additional commissions on product sales. In addition, satisfied clients will recommend the agent's services to their friends and colleagues. It is a win-win situation for all concerned: the client, the insurance agent, and prospective new clients.
Finding the sweet spot
This sales approach is based on the "sweet spot" that lies midway between the fee-based advisory model and the product-only sales model. To illustrate, the typical fee-based advisor usually charges high fees for their services because they do not make commissions from product sales. The high cost and large scope of these services intimidate business owners. On the other hand, the product-only model doesn't work because there are too many advisors selling the same cookie-cutter products.
The "sweet spot" business model works because business owners can choose among a selection of plans to address their needs. They pay a nominal fee for each plan without feeling obligated to buy a product. This model helps clients make well-informed decisions to purchase the financial products they need to protect and benefit themselves, their families and their businesses. These purchases, in turn, generate more income for the advisor.
There are many business owners who need a professional advisor to help them create contingency plans for their business. This valuable service gives clients peace of mind and confidence, knowing that they have done everything possible to take care of their business before it is too late.
Nathan (Nate) Sachs, CLU, ChFC, CFBS is the founder and owner of Blueprints for Tomorrow(TM), a Scottsdale, AZ-based financial planning consultancy. He can be contacted at 480-596-1525. For more information, visit www.blueprintsfortomorrow.com.
